Monday, March 17, 2008

Data mining as a tool to improve business

In some countries credit card companies gather extensive information on the purchases of their clients. This data is stored in large databases not only for record keeping purposes but to discover ways to better serve the card holders. Data mining, which is the process of discovering patterns, is conducted on the contents of the database. When patterns in the purchasing behavior of customers are found, these are used as a basis for determining what purchases may not have been made by the customer. When the information system detects card purchases that deviate from the usual pattern this prompts the system to call the card holder to verify the purchase.

This creates value for the card holder because the information system helps protect them from fraud. Some additional benefits of the data mining the purchases database is that helps the card company determine what freebies and promotions that the card holder would likely be interested in. Also, information generated from this data helps management decide on the features of their credit card to further improve customer satisfaction.

The use of data mining is not only limited to credit card companies. For instance other businesses that are engaged in retail can make use of data mining in order to improve their marketing techniques.

It is unarguable that data mining has a lot of benefits; however, data mining has also its concomitant issues that have to be dealt with. For instance, there is the issue of privacy. Will the data mining techniques violate the privacy of a person? What should be the guidelines for this? Should there be limitations as to its possible uses?

http://en.wikipedia.org/wiki/Data_mining
http://www.anderson.ucla.edu/faculty/jason.frand/teacher/technologies/palace/datamining.htm

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